Florida Mortgage Report

Money Merge Accounts: My Sincerest Apologies to Those With MMAs

I have some regret that I have to admit to about these programs.  I feel like I failed consumers by allowing them to be misled for far too long.  The truth of the matter is that I have done some more calculations, many of which I should have done back before I even posted my first blog about the subject way back in February 2007.  The bottom line is that I have now done those calculations and it is time to let the truth out.

Once again, I have simply taken the information from United First Financial's own presentation on their Money Merge Account™ program and run the numbers.  Then I ran them again because I couldn't fathom the results.  Being as skeptical as I am, I just couldn't believe the results, so I ran them more times and was absolutely astonished at the results.

Over and over again, the results came back with a very clear message:

"MONEY MERGE ACCOUNTS ARE A COMPLETE WASTE OF MONEY AND WILL ACTUALLY COST YOU MORE MONEY NOT SAVINGS"

That's right, and I am sure those UFF agents will want to argue this left and right in trying to defend this product (after all, they want your money), even saying that it's benefits found in the "sophisticated algorithms" go above and beyond the benefits related to the primary mortgage payoff, including that of being able to see the true cost of a purchase (cost plus interest over time, or cost of not investing elsewhere).  Try as they may, their own presentation shows its real value, $0.00, actually it costs you.

Here are the calculations once again and how it proves the Money Merge Account (MMA) actually prolongs the payoff and costs you basically its full price tag:

Mortgage:                    $200,000
Interest Rate:                         6%
Loan Type:               30-Yr Fixed
Discretionary Income:      $1,000

Quick recap:  The United 1st Financial presentation's claim is that the MMA program will pay this mortgage scenario off in 10.4 years and the program costs $3,500.

OK, here is where my calculations changed.  All I did was add the $3,500 price tag to the 2nd mortgage payment as extra principal, then simply added $1,000 extra principal (all the discretionary income) each month from the 2nd month going forward until payoff and guess what.  Well, since numbers don't lie, here are the results...

	UFF Presentation	$3,500 Extra Payment
Mortgage Payoff	10.4 years	9.92 Years
Investments @ 6%	$973,000	$1,023,307
Investments @ 8%	$1,231,000	$1,306,090
Investments @ 10%	$1,575,000	$1,685,967

Run the numbers for yourself, but the truth of the matter is this...MONEY MERGE ACCOUNTS WILL ACTUALLY COST YOU TIME AND MONEY!!!

The arguments that the sophisticated software will payoff over time don't hold water.

The arguments that the software can do a better job than you can on your own doesn't hold water either.

In fact, since you are making your mortgage payment every month already, all you have to do is adjust the payment amount on that check and that's it.  If you have recurring payments automatically, you never have to think of anything again.  YOU CANNOT GET ANY SIMPLER THAN THAT AND YOU WILL BEAT THE MMA according to their own presentation and facts presented.

So, tell your friends, family, anyone you come in contact with to prevent them from wasting their money on this expensive software.  They can do better.  You can do better.  Of course, I can help you employ strategies that create even more wealth, but this information will help you beat the mortgage acceleration programs.

So, again, please accept my sincerest apologies for not running these calculations and exposing these facts to all of you earlier.  I may not have saved everyone from buying these programs, but I may have helped a few people from being ripped off.

(Update for clarification due to some apparent confusion...1) The "2nd mortgage payment is the second payment on the primary mortgage, not a real 2nd mortgage.  2) I do not advocate simply throwing all of your money into your home like the comparison suggests.  Of course, if you have been reading my posts for any length of time, you would already know that.)

MMA (Money Merge Account): What is the True Cost of That $3,500 Price Tag?

I have had several inquiries about the "real" cost of the Money Merge Account software as it relates to the mortgage.  Of course, your real cost may vary as it is dependent on how much longer you have in the mortgage and what interest rate you are paying.

But, going to the same numbers used in United First Financial's own presentation, as I have done in my series on the MMA, here is a breakdown of it's cost over the course of the loan...

The question really is summarized as this:  "If I simply paid $3,500 extra toward principal, how much of a savings would I get?"

So, using a a primary mortgage of $200,000 and an interest rate of 6% in a 30-year fixed product, that $3,500, if used as an extra principal (in the second month) would result in a $16,560.18 savings and knock off 16 months from your mortgage.

Looking at it as a cost, that MMA program is actually costing you up to $16,560 dollars over time!  Now, will it truly cost that much?  No.  Why?  With the program you will not have the mortgage that long.

However, it does show that the cost of the software does take a bite out of the savings and adds to the timeframe of your mortgage payoff.  It also should be noted that with basic understanding of how the program works and cost of things over time, such as my Starbuck's coffee example, the software is a waste of money.  In fact, unless you need to be spoon fed, if you want to use a mortgage acceleration program, you are better off adding the $3,500 towards principal instead of the software.

(Update:  Further evidence the program is a waste of money...)

I decided that the above information was not satisfactory enough to thoroughly convince you that the Money Merge Account is a complete waste of money, so I ran some more numbers.  Of course, since I love playing with strategies and scenarios as I am a numbers guy, it was fun.

So, to give you a better understanding of the cost of the MMA program, let me return to the same assumptions made in my Money Merge Account/Mortgage Acceleration Series.  So, this will now be a Pseudo Part 2 1/2.

Taking the same assumptions from United First Financial's (UFF) own presentation, we will now simply compare the MMA payoff date with that of taking the $3,500 added to the principal instead of buying the MMA program, followed by sending in the $1,000 discretionary income each month and guess what.  That's right, not buying the software and simply sending in the money each month pays off the loan faster, in fact, you would be free and clear in 10 years versus the 10.4 years the MMA is showing as a payoff. 

As you can see now, the MMA program is costing you at least .4 years of your mortgage and that is without you utilizing a HELOC to add interest cancellation effects at all!!!

Money Merge Accounts: How Do They Work? (Beyond the Software) Part 4

I had been going back and forth about how to present this part in the series and decided to make make it more than just one.  The reasoning is that I want you to understand how these programs work and how you can easily do it yourself if you choose to enter one of these programs.

Money Merge Accounts are just software in and of themselves, but for the purpose of comparison, we will assume you have the HELOC in place so the software can work.  It is important to note that when looking to purchase a Money Merge Account (and some other programs), you still need to purchase an appropriate HELOC (ALOC) which may come at additional cost.

The entire basis of using a HELOC to accelerate the mortgage payoff is surrounded on the fact HELOC interest is calculated on "average daily balance" and not the monthly balance as is your primary mortgage.  By using the HELOC like a checking account get reduced balances every deposit and increased balances when you pay your bills.  So, if you can time your deposits and withdrawals, you can minimize the "average daily balance", thereby minimizing your interest accrued.

Make no mistake about it though.  Your primary, and vast majority, of "savings" is derived by the use of discretionary income to pay off your mortgage.  You also do not need expensive software to take advantage of these types of programs, certainly not for $3,500. 

One thing I will point out in regards to the United 1st Financial Money Merge Account presentation is about how the program is presented.  It "assumes" that you deposit your income and pay expenses in a way that simple addition and subtraction equals the "average daily balance", when in fact it most likely does not.  That means that the presentation, in effort to simplify the explanation of how the program works, basically shows incorrect numbers, numbers which you cannot truly expect to attain. 

This is what I will show in the next post as I want you to fully understand what is happening and how these work.  In the meantime, let's look at what the software will do for you.

The software does not move money around for you, you still have to do that, so you will need to be disciplined to act upon what it tells you.  After you input deposits and withdrawals, the program calculates looking forward to determine how much and when you should make an extra principal payment on your primary mortgage from your HELOC.  That extra payment is derived from a some of interest savings, but mostly ALL of your discretionary income.

So, to recap the basics, mortgage acceleration programs use a HELOC like a checking account to minimize interest expenses while using discretionary income to pay off your primary mortgage.  Some use software to help accomplish this, but the savings derived from the use of software versus doing it on your own is not significantly different, certainly not enough to justify a $3,500 price tag.

In the next post, I will use tables to show the UFF presentation and how they calculate monthly interest and "average daily balance" versus what a typical American's account will really look like.

This is a "Be Careful What You Wish For" Post

Recently, I began asking for more testimonials, something I usually do not do as I would like to think I would receive them when my services warranted.  Then I read something, somewhere that showed statistically that if you do not ask, you will not receive.  Well, being the numbers kind of guy I am, I realized quickly I needed to start asking.

Well, I have not mastered the art of asking for testimonials, but decided to ask one of the many non-clients that have come to me for advice to provide a testimonial if he chose to.  To say I was blown away is a major understatement as I was not prepared for the degree of impact I have had on this gentlemen's life.

Here is the exact testimonial, including his name, used with his permission...

"While reading the Active Rain real estate blog online, I stumbled upon some words of wisdom that made good common sense.  Those words were written by Mr. Robert Ashby.  I took the time to visit Mr. Ashby's website, found an email address,  and wrote a letter explaining my circumstances in hopes that he could lend some more solid advice.  Mr. Ashby found the time to respond to my request while he was on vacation, I couldn't help but think this was the type of person who truly cares about the advice they're giving.  That initial contact occurred over 1/2 year ago, and I've maintained loose contact with Mr. Ashby since then, and he always responds to my questions with what I still consider good solid advice.  I consider Mr. Ashby a great asset in my education and understanding of how to utilize my mortgage debt to create financial well-being. It should be noted that while Mr. Ashby works out of Florida, I live in the southwestern United States, and am NOT a client of Mr. Ashby's, yet he always listens to my concerns and responds in a timely fashion.  I wish my local mortgage lenders were half as helpful.  I look forward to my continued correspondence with Robert and consider him an "Advisor for Life".  Thanks Robert."

- Justin R.
Las Vegas, NV

(I underlined the one sentence for emphasis)

Money Merge Account Series: Update

I just wanted to send out an update as to why the series is not continuing at the moment.  It actually is being worked on, except I am trying to keep it concise and not create such long posts I lose you during the reading process.

For that reason, I have revamped the next post in the series several times, delaying the continuation of the series.  It will continue as I want it to be an educational process for every reader, and I want it to be a solid comparison (no BS).

It may take a while, especially over the holidays, but I will get out the posts as quickly as I can while maintaining the integrity of the series.  Also, once the series is completed, I will repost the series in a single day, reverse order, so it will present all parts in the order they should be read.

I hope you are enjoying the series so far and I will be uploading a Money Merge Account/Mortgage Acceleration video to YouTube hopefully be the end of the week.

To ensure you get the posts as they become available, click on the RSS feed symbol to the right and get the RSS feed or the email delivery of this blog.

Money Merge Accounts: How Do They Work? (Beyond the Software) Part 3

In my previous posts I have ventured off to show that the latest "fad" is not necessarily all it is cracked up to be.  Money Merge Accounts and other mortgage acceleration programs, while beneficial, may not be the most beneficial and there are some issues with them. 

If you have not already, please read the following:

Money Merge Accounts: How Do They Work? (Beyond the Software) - Part 2
Money Merge Accounts: How Do They Work? (Beyond the Software) - Part 1

In this post, I am going to explain how most Americans fail to realize the impact their decisions make, mostly chasing what some idiotic financial gurus claim is best, such as Suze Orman and David Bach, or even worse, relying on what their "salesman" is telling them.

I would say that most Americans have no real financial plan and they especially do not have a mortgage plan.  Most will go through life not adding even a dime to their mortgage payment for one reason or another and will more than likely spend it frivolously, wasting precious money along the way.  That was Option 1 in my last post by the way.

So, taking each option and carrying them out to the 30 year mark, let's run a comparison.  In the table below, using the same assumptions as before, here are the results...

	Investment Balance (minus mortgage if still owed)
Option 1 (do nothing)	$0
Option 2 (discretionary money in mortgage, then invest)	$1,001,578
Option 3 (invest discretionary income - payoff mortgage over 30 years)	$1,004,515
Option 4 (Use MMA or other HELOC, then invest @ 10.4 yrs)	$973,000
Option 5 (Use CMG for whole amount, then invest)	$917,842
Option 6 (IO loan, invest discretionary plus difference)	$1,005,205
Option 7 (IO loan, invest discretionary, difference, plus tax savings)	$1,255,542

Again, no smoke and mirrors here, simply using the same assumptions UFF uses in their own presentation, including based on a 6% rate of return (verify their number and the number inputted in Option 4 and you will see the same for a 6% rate of return on investments).

So, the Money Merge Account actually falls behind even the homeowner that simply pays down the mortgage on his own.  This is just according to this example and your particular situation may not result similarly, but you need to ensure you look at ALL options. 

Now, since investing allows for the opportunity to gain even more, let's look at the Options 1 thru 7 with greater rates of return, say 8% and 10% (that is what UFF used), alongside the 6% results and see the difference...

	6%	8%	10%
Option 1	$0	$0	$0
Option 2	$1,001,578	$1,273,803	$1,638,022
Option 3	$1,004,515	$1,490,359	$2,260,488
Option 4 (MMA)	$973,000	$1,231,000	$1,575,000
Option 5 (CMG)	$917,842	$1,150,901	$1,457,745
Option 6	$1,005,205	$1,586,941	$2,510,325
Option 7	$1,255,542	$1,959,531	$3,075,447

Again, no smoke and mirrors, using the same numbers from the UFF presentation and assumptions they used. 6% is a good, conservative number, while 10% may add too much risk for you. 

Again, that depends on your unique situation and so you need to seek a truly qualified professional (or professionals) to help you make the right choice for you.  But it should be clear that, while beneficial, Money Merge Accounts and other mortgage acceleration programs are likely not the best for you.

The other point this should drive home is the fact that that, due to the time value of money, the more money invested now will generate more money in the end.  Translation, the more money you send to the banker to pay off your mortgage robs you of more money for your own financial goals.

The next post will break down how the Money Merge Account works, with and without the software.  It will also talk about the CMG Home Ownership Accelerator the way they want you to use it, then will give options how you can save money using a spin off of what you learned.